State-owned RailTel Corporation of India share started off the first trade with a 15.96 percent premium on February 26. The stock opened at Rs 109 on the National Stock Exchange, against an issue price of Rs 94.
On the BSE, the share climbed 11.28 percent to Rs 104.60. The listing was along expected lines, with analysts predicting the stock to debut at 10-20 percent premium.
At 1002 hours, RailTel Corporation shares extended gains to trade at Rs
111.50 on the BSE, up 18.62 percent with a volume of 22.19 lakh equity shares.
It was quoting at Rs 113.55 on the National Stock Exchange, rising 20.8 percent with a volume of over 2.48 crore shares.
RailTel Corporation is the seventh listing in 2021 after Indian Railways Finance Corporation, Indigo Paints, Home First Finance Company, Stove Kraft, Brookfield India REIT and Nureca.
The company has garnered around Rs 819 crore through its public issue, which was a complete offer for sale and a part of the divestment programme for FY21, hence the proceeds will go to the government.
RailTel is one of the largest neutral telecom infrastructure providers in India. As of January 2021, it had an exclusive right of way along 67,415 route kilometers connecting 7,321 railway stations for laying optical fibre cable (OFC). The company has 59,098 route kilometers of OFC network, connecting 5,929 railway stations across towns and cities in India.
It also has a city-wide access network of over 18,000km and offers a high-capacity bandwidth of up to 800G at 87 locations in India. The company also offers leased line and VPN facilities along with IP-1 services.
"The company is going to play a key role in the digital transformation of Indian Railways. The company’s margins and return ratios are better compared to other telecom players in India. The company also has a strong financial position (debt-free) and has been consistently paying dividends since 2008," Keshav Lahoti, Associate Equity Analyst at Angel Broking told Moneycontrol.
"There are no listed peers for the company. RailTel had priced its issue at 21.4x PE on a FY20 trailing basis, which is quite reasonable by looking at the strong future growth rates of the company," he said.
The company has also inked agreements with telecom companies and multiple system operators (MSO) to lease bandwidth and offer last-mile optical fibre cable network connectivity across cities and towns in India.
RailTel reported a 7.5 percent CAGR rise in topline in FY20. Total operating expenditure increased by 5.6 percent CAGR (a rate lower than topline growth) over FY18-20, thereby leading to a 12.4 percent CAGR rise in EBITDA in FY20. EBITDA margin expanded from 27 percent in FY18 to 29.6 percent in FY20. Adjusted PAT increased by 8.9 percent CAGR over FY18-20. Its average RoIC and RoE stood at 8.6 percent and 10.6 percent, respectively, over FY18-20.
RailTel is profitable since FY07 and has paid a dividend since FY08. The average dividend payout stood at around 40 percent over FY18-20.
"Based on our quick estimate, the topline is likely to increase by 4 percent CAGR over FY20-23 to be at Rs 1,269.97 crore in FY23. EBITDA and PAT margin are forecasted to expand by 178bps and 26bps, respectively, during the period to stand at 31.4 percent and 17.1 percent in FY23 as compared to respective margins of 29.6 percent and 16.9 percent in FY20," Choice Broking said.
Considering the service and growth plans of the Indian Railways and RailTel's ability to monetise its existing assets through subscription plans and co-sharing with private operators, we feel that fundamentals are positive for the company," it added.